(CBS News) Below is a transcript of "Face the Nation" on March 3, 2013, hosted by CBS News' Bob Schieffer. Guests include Sens. John McCain, R-Ariz., Lindsey Graham, R-S.C., and Richard Durbin, D-Ill., along with Cardinal Timothy Dolan, the Archbishop of New York, and the Washington Post's Bob Woodward. Plus, a panel featuring Woodward, CBS News Political Director John Dickerson, Time Magazine's Rana Foroohar, and David Sanger of the New York Times.

BOB SCHIEFFER: Today on FACE THE NATION, the sequester was all Washington's doing. Now, Washington can't figure out how to undo it.

PRESIDENT BARACK OBAMA: This is not going to be a apocalypse I think as some people have said. It's just dumb and it's going to hurt.

SENATOR LINDSEY GRAHAM: Ronald Reagan should be rolling over in his grave. Shame on everybody who agreed this was a good idea on our side.

BOB SCHIEFFER: The idea was to force Washington to find a sensible way to cut the deficit. Well, so much for good intention. Both sides blame the other. The cuts kick in. And no one knows what to do. We'll talk to two of the administration's top critics, Republicans John McCain and Lindsey Graham. Then get the other side of the story from the number two Senate Democrat, Richard Durbin. We'll go to the Vatican and Cardinal Timothy Dolan of New York for the latest on choosing the new Pope. And we'll talk politics with legendary Watergate reporter Bob Woodward who has roundly irritated another White House this one. Plus, TIME Magazine's Rana Foroohar; David Sanger, the chief Washington correspondent for The New York Times; and our own John Dickerson. It's all next because the sequester can't stop us. We're FACE THE NATION.

ANNOUNCER: From CBS News in Washington, FACE THE NATION with Bob Schieffer.

BOB SCHIEFFER: And good morning again. Yes, we are FACE THE NATION. And our lead guests this morning, not exactly strangers to the broadcast. But the first time we've ever had both of them here in the studio together, Republican Senator John McCain and Republican Senator Lindsey Graham, both in the studio. Senator Graham, I am just going to start off--

SENATOR JOHN MCCAIN (Armed Services Committee/R-Arizona): Next sequester we're including you. All right.

BOB SCHIEFFER: I want-- I want to start off, Senator Graham, with something-- part of that speech you said on the Senate floor--

BOB SCHIEFFER: --because it seemed to really kind of sum up the week that Washington just went through.

SENATOR LINDSEY GRAHAM: To me, this is pathetic leadership by the commander-in-chief. This is an abandonment of the Republican Party's belief in peace through strength. This is the low point in my time in the United States Congress.

BOB SCHIEFFER: And Bill Kristol, who is the editor of the Weekly Standard kind of the voice of establishment Republicans, he said the Republicans have now, quote, his words, not mine, "...joined the President on the road to irresponsibility." He says, history will judge both your Republican Party and the President harshly saying "They were weighed in the balance and found wanting." So where do you go from here, Senator McCain?

SENATOR JOHN MCCAIN: Well, first of all, Bill Kristol is right and the fact is that we have now reached a point where if you believe our military leaders and if there's anybody that's credible in America today, it is our military leaders, where we will not have the proper training, readiness, equipment in order to defend our national security issues, and requirements. The centrifuges in Tehran are spinning. North Koreans are testing nuclear weapons. The Mid East is in-- is in period of varying degrees of upheaval. Al Qaeda is spreading. So we are going to cut back on the training and readiness and capabilities of the men and women who are serving. We have an all-volunteer force. They deserve better. And to my Republican friends as well as my Democrat friends, if you think that's the right way to go, then you don't know what's going on in the world. And this sequester, it requires a President to lead and for us to sit down. If he will stop going out and-- and running campaign events and then-- and bashing Republicans and coming back to Washington, why not take a day and invite us all over and work this out, because American national security is at risk. I can find billions in cuts, defense spending that are absolutely necessary and appropriate, not this way. Not when our chief of staff of the Army says that he's not going to be able to replace those who are fighting in Afghanistan with qualified and trained people.

BOB SCHIEFFER: So what do Republicans need to do, Senator Graham?

SENATOR LINDSEY GRAHAM: Well, I think we need to get off the sequestration highway. Two-thirds of the federal government's exempt from sequestration. The thing that bothers me the most is that we had this construct that you try to cut 1.2 trillion over decade. And if you failed the penalty clause, would be to take six hundred billion out of defense, six hundred billion out of nondefense, but you'd exempt two-thirds of the government. So, we've already cut four hundred eighty-nine billion out of the defense. So the way forward is a big deal. This is an opportunity for Congress to look at getting off the road to becoming Greece. So what I would like to see happen is that the President and Republicans and Democrats re-- reengage where they left off with Boehner, that we, as Republicans, put six hundred billion dollars somewhere in that neighborhood of new revenue on the table by flattening the tax code, eliminating deductions, and exemptions, take that money to pay down debt, and lower rates and we go to where the real money is over time, entitlement reform to save us from becoming Greece, and find a substitute for sequestration in a big deal, not a small deal.

BOB SCHIEFFER: Do you all feel that your party is somehow being held hostage? The President has talked about kind of a commonsense caucus, and we hear reports this morning that he started calling around, calling some Republicans to see what can be done. Are people on the extreme ends of your party holding the rest of you hostage here?

SENATOR JOHN MCCAIN: I don't think-- frankly, it's the extreme ends of the party. I think a lot of it is just people who don't understand. We-- we put up a proposal and most Republicans voted for a, quote, "flexibility" for the President of the United States. I spent hundreds of hours with Carl Levin shaping a Defense Authorization Bill. So, now we're supposed to just give all of that over to the President of the United States. That's a violation of my constitutional responsibilities. So, I say in respect that it isn't so much to the extremes as much as it is a lack of appreciation of the world we live in, and this has been manifested at other times and other ways as well.